When you’re struggling under the weight of debt problems, it’s all too easy to lose perspective. But panicking about your situation isn’t going to help, no matter how understandable that may be.

To stand a chance of overcoming your problems, you need to take a calm approach and decide which of your debts are the most urgent to deal with. Here’s how.

Government
Debt

If
you owe money to the government, whether it’s through outstanding taxes or unpaid
fines, you need to deal with these as a priority. This doesn’t necessarily mean
paying them in full, but you need to get in touch and make an arrangement of
some kind.

Ignoring
these debts will land you in a serious amount of trouble, including legal action,
and the authorities will never turn a blind eye to what you owe.

Debts
Which Impact Earnings

Next,
you need to take care of any debts which affect your ability to earn money. For
example, if losing your car means you’ll lose your job, then making your auto
loan payments should be high on your list. Without income, you have no chance
of keeping on top of any of your other debts.

Secured
Debts

If
you have debts secured on your home, you need to take a long look at this
situation. Pay what you can to prevent repossession proceedings, but also
contact your lenders and try and restructure your debt to make things easier.

In
the long term, consider taking the decision to sell your home and move into
cheaper rental accommodation. It’s better to do this in a controlled way rather
than hanging on and losing everything.

Life
Essentials

Next,
try and pay something toward your essential debts such as energy bills. These
may seem urgent, but in reality, so long as you don’t get too far behind you
won’t have your supplies cut off.

Energy
companies are usually happy to come to an arrangement to clear old debts over
time, so long as you make token repayments in the meantime. After all, they’d
rather you pay something than nothing.

Unsecured
Debts

At
the bottom of the heap are unsecured debts, particularly credit cards. Card
issuers will make a lot of noise if you owe them money and will send
increasingly scary letters threatening all sorts of dire consequences.

But
the truth is, if you default on an unsecured debt, the only thing at risk is
your credit rating. You can’t be sent to prison, and your possessions or home
can’t be seized to clear what you owe.

It’s
important to keep your unsecured creditors in the loop and pay what you can,
but don’t let them panic you into neglecting your other, more urgent debts.

It’s
a terrifying experience to be facing debts you can’t handle. But losing
perspective is one of the worst things you can do if you want to come out the
other side of your problems. Prioritizing your debts and keeping all your
creditors informed gives you the breathing space to find expert help and start
getting back on your feet.

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After graduating from the University of Calgary with a Bachelor of Science degree in Computer Science, Gerald joined KPMG (Formerly Thorne Riddell) as a Computer Accounting Customer Service representative. In this position, Gerald installed accounting systems in over 200 different small to medium sized companies over a 6 year span. In 1989, Gerald left KPMG to continue to work with small business clients in his own corporation installing computer accounting systems. While in this role, he was engaged by the DeVry Institute of Technology in Calgary to teach various courses. In time, Gerald moved up through the ranks of DeVry until he attained the position of Director of Finance for the Calgary Campus. He also acquired his Masters of Business Administration from City University of Seattle, Washington in 2001. Gerald’s career has always been focused on small business, accounting and education.

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